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rut vs rutw options
Last Update: March 1, 2024

RUT vs RUTW Options — What’s The Difference?

Learn about the all differences in RUT vs RUTW options contracts and determine which options are best for your trading strategy.

RUT vs RUTW Options Underlying Symbol

For those venturing into the realm of index options trading, deciphering the nuances between RUT and RUTW options can initially seem daunting. The base symbol for both RUT and RUTW options is RUT, representing the Russell 2000 index. This implies that whether you’re navigating through your brokerage’s platform, leveraging the Market Data API, or utilizing the Sheets Add-on, the RUT symbol is your go-to for exploring the full spectrum of option chains. When employing tools like Google Finance to locate the RUT ticker, you might notice a slight variation in the symbol. This variation in the option symbol underscores the settlement distinctions between the contracts, a common source of perplexity for traders engaging with RUT options for their initial trades.

Take, for instance, the scenario in September 2024, where traders are presented with two $2000 call options: RUT240920C02000000 expiring on September 20 and RUTW240930C02000000 expring on September 30. Not only do the dates vary. The minor differences in the settlement of these contracts are pivotal:

RUT vs RUTW Options Settlement

RUT options are settled in the morning (AM-settled) and expire on the third Friday of each month. In contrast, RUTW options offer more flexibility with weekly and quarterly expirations that settle in the afternoon (PM-settled). For AM-settled RUT options, trading concludes on the day prior to expiration, with the settlement price determined by the opening market price on expiration day. Meanwhile, RUTW options allow trading up to the market’s close on the expiration day, with the settlement price based on the market’s closing price. This distinction means that RUT options may experience additional overnight market volatility right before expiration. This volatility can impact trading strategies in various ways, both positively and negatively.

Last Trading Day Day Before Expiration Day of Expiration
Settlement Time AM (Opening Price) PM (Closing Price)
Tradable on Expiration Day No Yes
Settlement Date Third Friday of the Month Monday – Friday
Trading Hours 9:30 AM – 4:15 PM ET 9:30 AM – 4:15 PM (normal days)
9:30 AM – 4:00 PM (day of expiration)
Settlement Symbol RLS RUT

Frequently Asked Questions

Explore these frequently asked questions for a deeper insight into RUT and RUTW options.

What differentiates RUT from RUTW options in terms of symbols?

The differentiation between RUT and RUTW symbols is due to the fact that it used to be common to vary the root option symbol before 2010. Initially, RUT was the sole symbol representing the Russell 2000 index options. The introduction of RUTW was to specifically categorize those options that settle in the afternoon and offer weekly (and even daily) expirations, providing traders with more flexibility. After the the 2010 options symbology change, the decision was made to preserve both tickers since traders were already familiar with this.

Is there a difference in tax treatment between RUT and RUTW options?

In the realm of taxation, RUT and RUTW options stand on equal footing. As Section 1256 contracts, they both enjoy a favorable capital gains tax scenario, which is a distinct advantage over the tax treatment of individual stock or ETF options. Thus, tax implications do not favor one over the other.

What does it mean that RUT and RUTW options are “European”?

Both RUT and RUTW options are European-style options, which means they can only be exercised on their expiration day. This contrasts with American-style options that allow for exercise at any point up to expiration. For traders, this means that RUT and RUTW options are settled in cash based on the difference between the option’s strike price and the underlying index’s value at expiration, without the transfer of any physical assets.

Why do RUT and RUTW options use different settlement symbols?

One might wonder why there’s a need for different settlement symbols for RUT and RUTW options instead of simply using the index’s opening or closing prices. The reason lies in the distinct calculation methods for the settlement prices of the RUT options, separate from the index’s own price movements. This distinction is crucial for traders who hold their options through to expiration, as it directly affects the payout or cost incurred at settlement.

For a deeper understanding, consider the official CBOE documentation on RUT settlement. It highlights that RUT options use the RLS symbol for settlement, reflecting a calculation based on specific market opening prices.

The exercise settlement value, RLS, is calculated using the opening sales price in the primary market of each component security on the expiration date. The exercise-settlement amount is equal to the difference between the exercise-settlement value and the exercise price of the option, multiplied by $100.

In contrast, RUTW options settle directly with the RUT index value, offering a more straightforward approach to settlement.

Do other index options use modified root tickers like the Russell 2000?

Yes. The S&P 500 index has SPX and SPXW options, while the Nasdaq 100 Index has NDX and NDXP options. They work the same way as the Russell 2000, with the standard index ticker being used as the root ticker for the monthly/AM options and the SPXW or NDXP ticker being used for the weekly/PM options.

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